Monday, April 25, 2011

$20 Million reasons to fix Prop B

Barrels of ink have been spilt on the legislature’s efforts to fix problems with Prop B relating to the dog-breeding industry in Missouri. But little has been said about the unadvertised costs of the bill.

When Missourians took to the polls in November 2010, they were told by former State Auditor Susan Montee that the measure would only cost $650,000. Unfortunately, if not fixed, the true cost could be more than 30 times as expensive. The reason is the Fifth Amendment.

Under our federal Constitution, the Fifth Amendment Takings Clause provides a check on the actions of local, state, and the federal government to take private property without just compensation to the owner of that property. When people think of the Takings Clause, the usually think about eminent domain – where government takes someone’s home to build a new road – or, in some awful situations, to grow government revenue. But there’s also a strain of takings known as regulatory takings.

A regulatory taking occurs when a new government law or regulation prevents economically viable use of property or if its effect on a property owner’s ability to productive use is sufficiently severe.

When an alleged taking destroys most but not all viability, courts examine the claimed taking under a three-part test. A court must determine: (1) the economic impact of the regulation; (2) the interference with investment-backed expectations of the property owner; and (3) the character of the governmental action.

Prop B tells dog breeders around our state, the vast majority of which treat their animals with the utmost respect, that they can no long own more than 50 dogs – regardless of how well they treat their animals.

If challenged in court, Prop B could very well fail all three parts of the test. The economic impact of the regulation is to put many breeders out of business. The interference with investment-backed expectations is high because Missouri breeders invested in their facilities with the reasonable expectation that they’d be able to continue operating if they treated their dogs well. Finally, the character of the government action is arbitrary and capricious because it does not include any consideration of a breeder’s actual practices. The vast majority of dog breeders who treat their animals well are treated the same as abusive rogues regardless of their actual business practices.

If a court found that Prop B was a regulatory taking, the next question is how much it would cost the state. The industry has estimated that Prop B would destroy the value of 20,000 dogs in the state in facilities with more than 50 dogs. With an average value of $1,000 per dog, the easy math reveals that Prop B could cost Missouri taxpayers $20 million in lawsuits in its first year.

Would this knowledge have swayed enough Missourians to change the outcome of Prop B in November 2010? I believe it would have. The state of Missouri does not have $20 million lying around to pay the bill. Regardless of the merits of other parts of the legislation or the “Missouri Deal” that has been reached, the fiscally responsible thing for Gov. Nixon to do is to sign the fix passed last week in the Missouri legislature.